Clinton declared he would use budget surpluses to "fix" Social Security,
the ruse was obvious. He was trying to forestall the only moral
use of any surplus: cutting taxes. But a few days later, a very
strange trend began to develop. Clinton's words were endorsed and
echoed by D.C. conservatives and libertarians.
types began to say that, yes, all budget surpluses should
be used to save Social Security, but in a very special way. Surpluses
must not be used to fund "junk tax cuts" (in the words of William
Niskanen, who also congratulated Clinton for "taking the lead on
Social Security"), but to pay for a privatized entitlement program.
This would "guarantee," writes Martin Feldstein, an increase of
"national saving," a collectivist and potentially coercive goal.
This too is taken from Clinton, circa early 1995, when he announced
that a broad tax cut was a bad idea because it would only give people
more money to waste.
understand this turn of events, with pro-market people demanding
that FDR's redistribution scheme be saved, requires some background.
It's been clear for decades that Social Security as we know it will
not survive far into the next century. Today's taxpayers fund today's
checks, with the bureaucracy taking its own large cut, and demographics
are progressively exposing the shell game.
let's be clear. It's never been an "insurance" program any more
than medicaid or even food stamps. The program violently taxes some
people in order to pay others. All the rest of the apparatus is
an attempt to fool.
to do? The program should be abolished as inefficient, immoral,
violent, socially damaging, fraudulent, and incompatible with freedom.
Polls agree. People now being taxed are angry at the self-evident
rip-off, and say they would like to plan their own retirement without
the government's help, thank you.
government is faced with only two possibilities for reform: cut
spending or raise taxes. The first option would make powerful lobbies
mad. The second was made possible in 1982, thanks to cover provided
by Alan Greenspan, but now public resistance to another tax increase
along came the privatizers with what they claim is a third option.
Social Security can be "saved' with a simple change in accounting.
Let's call tax revenue "individual accounts" and ask people how
it should be "invested." Tell them that they can "manage" their
taxes to produce a higher "rate of return" than the present system.
To underscore this idea, they propose we "calculate" how much higher
a return we would have if government redirected our tax dollars.
rid of Social Security.
this exercise disguises the true nature of the operation. A sheer
transfer program cannot be said to have a rate of return. Indeed,
the net "return" on all redistribution is negative, since there
are always better uses for our dollars than handing them over to
the government. The appropriate question is how much more prosperous
we would be if we didn't pay the tax at all.
privatizers, who freely admit they want to save the government's
face, also promise that all present check cashers will receive every
last dime they believe they are owed, while those being taxed now
will receive huge payoffs. This miracle will be accomplished through
diverting some taxes to the stock market. Wall Street, which came
up with the idea in the first place, has bought policy guys left
and right to provide intellectual credibility for the notion.
note this crucial fact: the privatizers do not propose that people
be allowed to decide how to use the money that has been extracted
from them. Privatizers want people to continue to be taxed just
as now, but for some of the tax money to flow to a favored industry.
short, the privatizers propose to save the biggest redistribution
racket in human history by cutting Wall Street in on the deal. In
earlier years, anyone who had proposed forcibly extracting some
percentage of Americans' wages and funneling it into stocks
all in the name of boosting national savings would have been
called a socialist. Today, he's a privatizer.
it is no surprise to find the privatization movement joined at the
hip with the Clinton administration in blocking tax cuts. Even worse,
their plan would end up increasing taxes to both divert revenue
and meet federal promises. That's why, as USA Today
pointed out, privatizers, in private, advocate "hefty new taxes
to fund the transition. " In public the Wall Street Journal
says that, all present "benefits must be protected through new taxes."
away the rhetoric, then, and the privatization plan is a glorified
Greenspan Commission: patching up a program based on extortion with
evermore extortion. Even better, wrap it in the language of markets
national-socialist legacy should not be saved, and it cannot be
reformed. There's only one honest way out of the mess. Get rid of
Social Security. Buy off the "liabilities" with tax cuts, stop redistributing,
and let Americans really make their own decisions about what
to do with their money.
READING: Symposium on Social Security, American Economic Review
86, no. 2 (May 1996).